Towards sustainable management: Exploring the role of internal monitoring in pollution prevention

Researchers in the field of sustainable management have recently dedicated significant efforts to understand why organizations exhibit diverse responses to environmental responsibilities. Ethical scholars assert that internal management plays a pivotal role in promoting sustainability because of its attitude toward sustainable issues. In alignment with this perspective, our study formulates a framework for internal monitoring that underscores the significance of independent, female, international, and politically connected directors. We investigate how these internal monitors influence a company’s commitment to promote sustainable investments for pollution prevention. By employing fixed effect model and generalized method of moments (GMM) on a dataset obtained from the largest emerging market—China over the period 2012 to 2019, our findings indicate that the mentioned monitors demonstrate a stronger commitment to pollution prevention by promoting corporate sustainable investments. In addition, our analysis reveals that when the government withdraws its involvement in enterprises, it has a notable negative impact on the connection between internal monitors and a company’s efforts in pollution prevention. Our results imply that implementation of sustainable policies for pollution prevention fundamentally result from not only internal management, but also from powerful stakeholders (like government involvement). Moreover, our study educates the policy makers regarding the social consequences of governmental withdrawal.


Introduction
The recent rise in corporate governance reforms opens-up potential channels influencing firms' propensity of sustainable goals.An efficient sustainable management system promoting sustainable practices is characterized by more comprehensive structures for decision making and monitoring, thereby creating synergistic impacts of internal monitoring mechanisms [1].Previous scholars concur that corporate critical decisions should be instigated by internal monitors, as their perspectives on critical issues hold considerable significance [2], because they utilize their monitoring capacity to influence corporate policies [3].Internal monitoring structure, like diversity among directors, serves as an internal sustainable mechanism that effectively promotes the alignment of interests between shareholders and stakeholders [4].Although a substantial body of research suggests that internal monitors significantly influence various corporate outcomes, including financial performance [5][6][7], corporate social responsibility (CSR) and environmental performance [8][9][10][11], however, prior studies in the CSR domain have predominantly focused on the role of internal monitors in overall CSR performance.They have neglected to consider the broader implications of internal monitoring on a vital facet of CSR, specifically, corporate sustainable investments for pollution reduction.Awan, Braathen [12] argue that internal sustainable management is a critical research area that would be especially important for organizations that have yet to take stringent measures to tackle sustainability challenges.Given this, we raise an important question: Do internal monitors exert an influence on a company's dedication to pollution prevention efforts?
In emerging economies, the implementation of promising global governance principles is still being interrogated [13,14].The need to adopt effective internal control strategies and governance practices in order to navigate sustainable investment is therefore salient.From the previous evidences on internal monitoring approaches in sense of China, researchers recognize that few of monitoring arrangements can be more effective to watch and monitor the behavior of top management, which may provide conclusive insights [15].Besides, the research on internal governance role in China establish that a more holistic method is better to use for capturing a firm's internal monitoring approaches [16].Therefore, this study seeks identifying role of various internal monitors in firms' environmental investment.Scholars, practitioners, and policymakers have all had significant discussions about how to establish internal monitoring system.As a result of increased public attention, diversity in directorship has gained prominence [7,17,18], since they control the supremacy of shareholders and its effect on corporate environmental behavior.
Importantly, diversity in internal monitors can develop novel standards and priorities that can be the powerful impetus for sensitizing environmental protection in emerging markets.Diversity introduces unique participants to the board with different views, perspectives and background [13].Such novel perspectives and standards can put pressure on companies to carry out strategies for pollution control [19].The diversity of internal monitors strengthens the process of decision-making within companies through diversified experience, viewpoints, values and beliefs [7,20].However, some internal monitors' nature and types are considered to be better stakeholder oriented and tough monitors in such regards.The degree to which firms' boards perform environmental responsibilities is hotly discussed, it may be influenced by the directors' backgrounds and personalities [21].For instance, it is noteworthy that independent, female, foreign and politically connected directors have now become particularly prominent in Chinese governance system.From an agency theory point of view, the core roles provided by them including guidance, advising and monitoring of management, provide the reason for the essential need of these effective directors if sustainable policies are desired [22].
Within the agency theory framework, this study contends that including a group of internal monitors in decision-making processes, such as those related to pollution reduction initiatives, is essential for encompassing the array of managerial perspectives.Considering the uncertainties and potential financial risks linked to pollution control through environmental investments, along with the substantial degree of managerial discretion required in such choices, we assert that internal monitoring serves as a crucial cognitive trait.It aids both managers and owners in interpreting their own intentions regarding pollution reduction.Thus, this research particularly investigates heterogeneous sources of internal monitoring accumulated by independent directors, females directors on board, board internationalization and politically connected directors and their association with corporate investment in pollution reduction.
Using a data sample from an emerging market (China) over 2012 to 2019 period, our findings of fixed effect and generalized method of moments (GMM) reveal that independent, female, foreign and politically connected directors load positive and significant impact on pollution reduction investment.Further analysis reveals that this phenomenon exists more strongly in firms where government hold dominance, since such firms face higher regulatory pressure relative to their counterparts.Along this, we find that the impact of internal monitors on corporate pollution prevention is weaker in firms where government withdraws its ownership.Part of the reason for this relationship may be due to the obvious impact of privatization to replace state control and supervision of the company's internal management with shareholder control and supervision.Thus privatization of state assets is expected to lead top management to prioritize profit oriented interest over societal interest that can hamper the corporate environmental investment decisions.These findings present a strong case that the pollution control investments of internal monitors significantly contribute to the prevention of pollutants, but this this phenomenon is weaker in privatized firms, which has significance policy implications.

Research gap
Despite a stream of research investigating the effects of directors' characteristics on comprehensive CSR performance, including aspects such as gender diversity on boards [23,24], board independence [9], board's political connection [11,25,26] and board internationalization [23,27], a significant research gap exists in the literature.Particularly, the corporate investment in pollution reduction, a crucial component of corporate social responsibility, has not been extensively studied in relation to internal monitors.The current body of literature lacks a comprehensive exploration of the role of internal monitors in pollution reduction investments aimed at improving air quality.This research gap underscores the need for a more holistic examination of how internal monitors contribute to and influence pollution control strategies within organizations.Therefore, our study aims to address this gap by delving into the nuanced dynamics between internal monitors and pollution reduction investments, providing a more comprehensive understanding of their role in enhancing environmental sustainability.Secondly, this study draws a comparison on the effectiveness of pollution reduction investment by the internal monitors of government controlled firms and reveals that contrary to the environmental investment outcome of privatized firms, the investment activities carried out by the internal monitors of government controlled firms significantly reduces the emission of pollutants.Our findings thus contribute to the literature on privatization and government withdrawal by highlighting that internal monitors within firms experiencing government withdrawal can be held directly responsible to private shareholders.In such instances, their actions align with the preferences of private owners, who typically prioritize economic objectives, often placing less emphasis on environmental goals compared to other objectives.

Literature and hypotheses
China is one of the world's largest carbon polluters, its economic expansion has come at a cost in shape of environmental deterioration [28].In particular, Chinese enterprises' carbon footprints have steadily increased over time highlighting the country's environmental disasters [29].According to the report on air quality issued by the Ministry of Environmental Protection in 2016, only 25% of the cities at the prefecture level had air quality that met criteria [24].In China, companies account for the majority of environmental pollution and usage of energy, with 80% of the country's air pollutants coming from such enterprises [28].Although China has taken great advances toward renewable energy transition [30,31], the listed firms have yet to significantly increase their pollution reduction investments [32].A significant example of environmental CSR is corporate investment in pollution reduction, which may be used as a powerful instrument to reduce the problems with environmental contamination that are now prevalent, also echoed by Awan, Arnold [33].
Since the environmental quality in emerging economies is quite low [34], environmentalists are looking for factors to encourage environmentally beneficial investment [35].Because investing in sustainable projects carries a significant risk and has a lengthy payback period [36], and such investments are likely to have large agency costs, considerations that encourage environmental investment are particularly important.In doing so, it was determined that internal monitors are the most fascinating factors influencing sustainability performance [17,27].From the perspective of agency theory, it is posited that a company's directors play a critical role in monitoring and directing the behavior, decisions, and actions of corporate management.This oversight is essential for mitigating agency problems inherent in the principalagent relationship within a corporation [37,38].In the context of sustainability performance, the role of internal monitors becomes crucial as they are tasked with ensuring that management decisions align with the long-term sustainability goals of the organization.The application of agency theory provides a theoretical lens through which we can understand the significance of internal monitors in fostering sustainable practices within corporate structures.Keeping in view the stakeholders' demand for sustainable corporate development, Hussain, Rigoni [22] and Naciti, Cesaroni [39] also argue that the agency theory better explains the role of internal governance in stakeholders' management, since effective governance can reduce the agency problems by holding managers accountable to the wide variety of stakeholders.This theory further postulate that independent, female, and foreign directors are comparatively much involved in internal monitoring when keeping the guidelines and a company's ethical conduct [18,27,40,41].Therefore, they have clear motives in support of stakeholders to discourage and recognize opportunistic activities, critically challenge and assess management and corporate outcomes such as sustainability performance.

Hypotheses development
Monitoring role of independent directors in corporate pollution prevention.The status of an independent director has emerged as one of the most debated attributes within the composition of a board of directors.Advocates contend that independent directors exhibit greater strength in terms of control and monitoring functions [42].Even in situations where conflicting interests arise among shareholders and stakeholders, it has been observed that independent directors play a pivotal role in organizing and establishing the direction of the board [20].Their presence is crucial for ensuring a harmonious environment that aligns the interests of both shareholders and external stakeholders.The inclusion of independent directors at the board level is deemed essential to foster enhanced productivity in decision-making standards.Beyond their experience, independent or external directors are often characterized by a lower inclination to engage in opportunistic and self-interested activities [43].This underscores the importance of having independent directors as a stabilizing force within boards, contributing to more ethical decision-making processes and organizational integrity.
Independent directors, hailing from external backgrounds, play a crucial role in ensuring legal compliance and safeguarding the rights of minority shareholders [11].Their external perspective facilitates closer connections with stakeholders, enhancing their understanding of stakeholders' needs and increasing the likelihood of meeting their expectations [44].Boards with a higher proportion of independent directors are associated with increased corporate engagement in environmentally friendly practices aligned with social principles.Additionally, these directors demonstrate a better grasp of the corporate environment and are generally more adept at managing external contingencies [45].In addition, the integrity and prestige of independent directors can be related to their companies' ethical and socially responsible behavior.To maintain own status and future career advancement, these independent members will be more induced toward green practices and will exert pressure and persuade managers to facilitate environmental protection policies in the company [46].This is why independent directorship is particularly interested in demonstrating compliance with regulatory requirements and are very cautious regarding the socially and ethically responsible actions of the firms [8].As a consequence, board of more independent director seem to be more inclined to make sure their firms operate in more environmentally and socially accountable way.
Taken together, it is anticipated that independent directors tends to defend and encourage environment-related investments that are beneficial for reducing pollutants in the air.They may enhance corporate investment in pollution control through their objective oversight and commitment to promoting ethical and socially responsible practices.Their independence from the company's management reduces conflicts of interest, enabling them to prioritize environmental initiatives that benefit both society and the company's long-term sustainability [47].They often advocate for transparent reporting, ethical behavior, and responsible corporate citizenship [19], all of which contribute to a positive environmental image and attract socially conscious investors and customers.Their presence on the board ensures that pollution control measures are not compromised for short-term gains, fostering a corporate culture that values environmental responsibility.Based on the above discussions, we formulate the following hypothesis; Hypothesis 1: Independent directors positively influence and contribute to corporate pollution prevention efforts.
Monitoring role of female directors in corporate pollution prevention.In spite of the important role of independent directors, the representation of female board members also serves as an efficient tool for corporate governance and strengthens the effectiveness of the board [48], because female director enhances innovation, awareness, knowledge, creativity and important decision-making, which in turn contributes to enhanced organizational outcomes [49].Based on agency theory, female directors can strengthen board independence and corporate efficiency through effective monitoring of the self-interested activities and behavior of shareholders and management [50], and this can result in improving environmental performance.Since concentrated shareholders may extract more private opportunities but presence of women on boards may assist in environmental strategy development.
Numerous studies suggest that the inclusion of women on boards has a significant impact on non-financial outcomes [23,51,52].Evidence also indicates that women directors play a role in shaping various aspects of CSR, including involvement in philanthropic activities [53], and a heightened commitment to environmental responsibilities [54].Gender diversity is seen as a key factor in understanding differences in social norms, preferences, behaviors, and psychological phenomena, which, in turn, has implications for CSR.As relevant to CSR, Hafsi and Turgut [8] posit that gender diversity can strengthen social practices, particularly within the realm of CSR.In context of environmental engagement, Moreno-Ureba, Bravo-Urquiza [55] revealed that women exhibit superior environmental approaches, a stronger dedication to environmentally friendly entrepreneurial endeavors, and a greater capacity to leverage their specific characteristics to influence strategic changes related to environmental initiatives.
Similarly, Konadu, Ahinful [56] argue that women, with their heightened environmental consciousness, play a pivotal role in driving environmental innovation and emissions reduction in firms with female representations on the board.Liao [57] claims that female directors can make positive contributions to environmental innovations than male directors.They can devote closer attention to the social interactions and public reputation of corporations and also give greater attention to environmental innovations.
However, prior research has paid a lot of attention to explore comprehensive CSR or environmental performance in relation to female director.Corporate investments in pollution reduction is another important facet of CSR that appears to go against the fundamental tenet that businesses are primarily focused on maximizing their profits, such investment serves to highlight the sense of environmental obligation that businesses have.Based on the rationale provided above, we predict that female directors will greatly boost the amount of funding invested in pollution control, lowering pollutants in the air.Thus, the following hypothesis is generated: Hypothesis 2: Female directors on the board positively influence a company's commitment to corporate pollution prevention.
Monitoring role of international directors in corporate pollution prevention.Board internationalization generally refers as a component in assessing the diversity of boards that brings diversified experience and monitoring, wider social connections, international support, and potential for listing.Foreign director on board is the main internal mechanism supervising management and the implementation of regulations [58].Previous studies have generally viewed foreign members on board as members with many cultural diversity from the company's origin or country, enabling them to demonstrate a wide range of perspectives and ideas.This helps them to actively participate in decision-making procedure related to social policy [59].International directors, on the other hand, are not representatives of national elites, making them more autonomous and hence stronger monitors.Furthermore, the involvement of international directors can aid in preventing excessive levels of board cohesion [27].That is, since these board members are not part of the (national or international) close circle of managers, they seem to be more inclined to promote critical policies [60], such as environmental policies.The heterogeneity of board members allows issues to be solved and strategies to be promoted from environmental perspective, offering fresh ideas from a multicultural viewpoint [27].
International directorship, although often constituting a minority on boards, plays a crucial role in safeguarding the interests of various stakeholders, particularly dominant stakeholders such as the government [61].Given that governments are seen as prominent promoters of environmental objectives, foreign directors should encourage and safeguard their interest in preserving the image of companies and themselves.As Lau, Lu [62] demonstrate that foreign board members not only symbolize a company's international profile but also contribute to a heightened focus on social accountability, attributed to the perception that Western companies adhere to higher ethical standards and moral behavior.Foreign board members, instead, serve a significant monitoring role in improving strategic choices concerning social and public practices and their reporting.Luo, Ma [63] assume that foreigner directorship could signal a greater dedication to internal monitoring and accountability and boost the image of the company in the financial market.In line with agency theory, a board with a substantial proportion of foreign members is viewed as having greater independence, thereby reinforcing supervisory and monitoring functions [64].The active engagement of foreign directors in board-level discussions and decision-making processes contributes to the adoption of innovative and environmentally responsible strategies, aligning the organization with international standards and facilitating the achievement of environmental goals.
In conclusion, multinational board members face considerable pressure from an extensive stakeholder group to integrate environmental priorities into their organizational policies, underscoring the heightened expectations for social contributions when foreigners hold management positions [59].The diversity in nationality on boards has the potential to enhance cognitive implications, fostering increased collaboration in addressing complex issues and generating valuable ideas.This diversity contributes to more nuanced and practical approaches to problem-solving on the board, leading to the formulation of high-quality actions, such as pollution abatement strategies.Given their international visibility and experience, multinational board members are likely to be more attuned to the need for direct responsibility for the social implications of the organization [65].Consequently, they are better positioned to champion and promote environmental activities within the organization, aligning with international standards and contributing to broader sustainability goals.Overall, this discussion leads to the following hypothesis: Hypothesis 3: The presence and active participation of foreign directors on a company's board positively influence the effectiveness of pollution abatement investments.

Monitoring role of politically connected directors in corporate pollution prevention.
Along with to the monitoring function of boards, political connections of directors are seen as being important for influencing organizational environmental behavior [66], especially in emerging markets like China [25].One of the main reasons for this is that top managers are more powerful because of their political connections that make them able to impose governmental policies [67].The strategic response of firms that have politically connected boards might differ from their counterparts because the boards of such companies are under more political scrutiny, as Reimsbach, Braam [26] assert that politically influential peers view state level institutions to be more stringent, which makes strategic decisions more sensitively.In addition, such boards are more accountable to the government because their companies typically receive privileged treatment (like bank loans with lower interest rates [68], lighter taxation and security for property rights [66].Such benefits might help to relax the financial costs of social expenditures and share the risks of social projects with the government and so motivate firms to adopt social practices.
In growing economies such as Russia [69], China [41], and India [70], senior managers' connection is seen as important to their companies' prosperity.Political connections are considered reputational capital for directors, so they are interested in maintaining their reputations by keeping a close eye on their firms' management and decisions [71].Instead, they tend to pursue social and environmental objectives for their personal goals, such as to bolster their future political careers [72], and to increase the chances of promotion [73].Therefore, to protect the firm and its career and reputation, politically connected boards member are likely to induce their firms to behave in socially accountable ways, and if they will not, the board members may lose their political career and the firm may lose its legitimacy [74].
In a broader context, internal monitors with political connections wield significant potential, power, and motivation to allocate resources to societal investment.Their career advancements and job opportunities are not solely contingent on maximizing firm revenue but are also intricately linked to their ability to support social purposes aligned with government objectives [75].his dynamic is influenced by the fact that firms with political connections often navigate higher taxation and market control constraints more adeptly, enjoying favorable incentive packages, improved access to loans, and better trade agreements [66,68].These fundamental advantages of political links come at a cost for firms to comply with government policies, which are largely based on social commitments.Consequently, the political power held by internal monitors can exert a profound influence on resource allocation, decisionmaking processes, and the prioritization of environmental initiatives.Their influential positions play a pivotal role in determining whether a company commits significant resources to pollution reduction, adopts sustainability practices, and engages in environmentally responsible projects.Based on these discussions, we make the following hypothesis; Hypothesis 4: Politically connected directors serving on a company's board positively influence corporate investments intended to reduce pollution.

Data
A panel sample of Chinese listed companies was employed in the present study.Secondary data from the China Stock Market and Accounting Research (CSMAR) database for the years 2012 to 2019 was acquired in order to estimate the research variables.On the other hand, data on pollution reduction investments were obtained from Rankin's agency (RKS) that evaluate CSR and sustainability reports of the corporations.This research combined data from mentioned sources and removed firm-years observations with incomplete information (on selected variables).Additionally, the firm-year observation of the firms with H and B-shares were not considered since these companies are subject to foreign laws and regulations [26,76].As a result, these firms' traits and nature become unique from those of the Chinese A-share listed companies.Due to their unique ownership structures, laws, and accounting norms, financial firms were also excluded.To test the hypotheses, we initially collect 5,508 firm-year observations highlighting information regarding pollution reduction during the sample period.However, we integrated the data for all independent and control variabes used in analyses and dropped 428 observations that lacked the necessary information needed for independent and corporate-level control variables.After eliminating the firm-year observation for missing values, all these procedures lead to a final sample of 5,080 firm-year observations (S1 Data).

Measures
Dependent variable.This study employs corporate pollution prevention (CPP) as a dependent variable that specifically refer to firms' investments in pollution emissions to control pollutants in the environment [24,77].CPP is a ratio between the total investment in pollution reduction and the average total assets that represents a company's environmental investment.Each company's "Sustainable Development" and "CSR" reports are manually scrutinized for CPP data.
Independent variables.1) Independent director.Previous studies on board independence have used different proxies for independent directors [8,46,62].This study uses a proportion of independent director to total directors on firms' board (Ind) to capture the degree of board independence.
2) Female director.This study also examines the role of gender diversity because woman directors also perform central role in firms' decision making.Thus, following the studies on the role of gender diversity [78], we measure board gender diversity (Female) by using continuous variable that refers to the proportion of women director to total corporate directors.
3) Politically connected directors.Since boards with politically linked members play a particular role in shaping critical choices, thus we examined the board's political connections as an internal monitor.According to prior research, directors having currently or even previously served as military, local, or federal government officials is referred to as their political connection [26,66].The proportion of politically connected directors is used as a measure for political connections (Political_D).
4) International directors.Board internationalization reflects the existence of foreign directors from different nationalities on the boardroom and regarded as one of key director's attribute that provide valuable access to diversified experience and abilities, wider social connections, and international support.Consistent with prior research [9,27], our study use the proportion of foreign directors to total directors on board (Int_D).
Control variables.To follow the convention of internal governance literature and isolating the impact of internal monitors on CPP, this study also controls for different firm-level characteristics.For instance, this study controls for board size indicating number of corporate directors (Board_S).Studies have established that larger boards are powerful and conducive to better participation and supposed to be efficient at supervising corporate management, therefore, resulting in effective decision making [45].To achieve long-term benefits, board shareholders prefer to invest more in environmental protection.So, this study control for board shareholding (Board_Own) that is the ratio of shareholdings by directors, even though elevated concentrations of company ownership by directors could convince the enterprise to deal with social priorities for improving the company image [25].Further, prior studies have claimed that serious corporate governance issues arise if executives hold more than single position because the board fairness and effectiveness at the time of taking significant decisions can be seriously affected [79], thus we add duality (CEO_D) that is measured as a dummy approach equal 1 if CEO keep position of chairman and assign 0 otherwise.
Because financial measures can drive a company's social motivations [80], so I keep track of return on assets (ROA), which is the profitability ratio divided to total assets.Similarly, we add Tobin's Q (TobinQ) as the corporate market value divided by total assets.To be specific, profit making companies garner increased public emphasis than other companies.Furthermore, younger entities are expected to spend in social goals [74], we look at firm age (Age), which is the couple of years whereas a corporation first became public.Moreover, because larger corporations receive additional media coverage than smaller corporations [41] and such companies have greater resources, we thus consider company size (Size) who is expressed in total assets by taking its natural log [81], and growth (Grow) that indicates changes in total asset values over a year.The higher firms' growth may allow top management to be more responsive to societal demands, preferring the allocation of resource in social projects.

Descriptive statistics and pairwise correlation
For showing the trend about the study's variable, we have included the mean of dependent, independent, and control variables over sample period.The summary of statistics in Table 1 shows that the pollution reduction investment varies from 0 to 205.74.The average CPP is 1.67, reflecting the sample companies' average investment aimed at reducing pollution, with the standard deviation of 9.068, which are indicative of substantial variations in pollution control investment across Chinese firms.
Concerning independent variables, Table 1 shows that the average of ratio of independent director is 0.38 with maximum of 0.80 of total directors indicating that on average, 38% director are serving on independent board seats.The average ratio of female director is 0.121 with the deviation about 0.113 and maximum of 0.74 of total directors are identified in our sample.Besides, on average 27% ratio of politically connected directors to total directors can be observed in our sample.Finally, Table 1 reports that on average 2.2% directors are proportionately foreigner on board.
Table 2 exhibits results of pairwise correlation for all variables.The positive and significant coefficients of the proportion of independent directors (Ind), female directors (Female) and politically connected (Political_D) and international directors (Int_D) show that the directors' diversity on board have positive correlations with CPP, suggesting that independent, female and politically connected and foreign directors show responsible behavior and have concerned with pollution prevention investment.These results also indicate and signal preliminary evidence that monitoring instruments such as diversity in directors and their diverse backgrounds positively influence the firms' environmental behavior, but this needs further investigation applying different regression analysis.

Research design
As the present study has utilized panel data, so following previous studies [78,82,83], we used fixed effect model as a baseline method to examine the effect of different internal monitors on corporate pollution prevention (CPP).Panel datasets often contain unobserved or time-invariant characteristics that can affect the main analysis.Fixed effects regression accounts for these unobserved individual differences by including individual-specific fixed effects in the model [84].More specifically, in panel data analysis, endogeneity (correlation between the independent variables and the error term) can be a significant concern.Fixed effects models can help mitigate endogeneity concerns by controlling for time-invariant unobservable factors that may be correlated with the independent variables.In addition, we have also used the generalized method of moments (GMM) because GMM can be a robust approach for dealing with endogeneity issues in panel data analysis.It allows us to control for unobservable heterogeneity through fixed effects while addressing potential endogeneity concerns through instrumented estimation.
We utilize the following equation in our analysis by applying fixed effect regression and GMM model to explore the link between internal monitors and CPP; Where CPR denotes a company's investment in pollution reduction efforts; and Monitors represents different internal monitors at board level including independent, female, politically connected and international directors; Control denotes different firm-level variables.

Main regressions analysis using fixed effect model
Table 3 presents the estimation outcomes for various categories of internal monitoring mechanisms and their impact on corporate pollution prevention (CPP).In Model 1, the results pertaining to the proportion of independent directors (Ind) indicate a statistically significant and positive relationship with pollution reduction investment, as evidenced by the coefficient of Ind (β = 1.608, p < .01),lending support to our first hypothesis (H1).The positive and significant coefficient of Ind indicates that higher proportions of independent directors boosts boards' independence in a firm through which they effectively monitor the environmental behavior of a firm, and align the corporate interest with stakeholders' interest.This suggests that boards that possess a high level of independence and monitoring authority can effectively oversee and influence management decisions [43].This increased vigilance can potentially enhance the company's ability to implement pollution reduction initiatives.Previous evidences also claim that such directors sensibly meet the needs of society and are much anxious about the firms' ethical facets than inside managers [19,47].Independent directors are portrayed as more likely to comply with governmental policies, especially those related to environmentally responsible behavior [85].This compliance can be attributed to their concern for the firm's reputation and their understanding that adherence to such policies is essential for maintaining and enhancing the company's standing in society.Since their prestige is strongly connected with firms' reputation [86], can create a strong incentive for these directors to ensure the company meets or exceeds environmental standards set by regulatory bodies.Overall, the logical explanation lies in the idea that independent and vigilant boards, less influenced by internal interests, are better positioned to ensure environmentally responsible decision-making.Their commitment to meeting societal needs and complying with regulations makes them instrumental in driving pollution reduction initiatives within the company.Model 2 of Table 3 reports the findings regarding female directors showing a notably significant and positive relationship.The coefficient associated with female directors (Female) is β = 2.548, with a high level of significance (p < .05),indicating that internal monitoring facilitated by female directorship could have a positive impact on pollution prevention investments that supports our second hypothesis (H2).This association confirms that companies with larger proportion of female directors display more likelihood toward CPP.Our evidence underscores the strategic importance of augmenting management team compositions through a deliberate increase in the representation of female directors.This resonates with the contemporary discourse on diversity and the inclusion of female directors within corporate governance contributes to a more robust process of environmentally responsible decision-making within management teams [54].The diversity in perspectives, particularly those brought forth by female directors, is posited to enrich the overall cognitive landscape of the team [87].Hence, the findings not only support the argument for increased gender diversity in leadership roles but also emphasizes the broader impact diverse perspectives can have on addressing critical issues such as environmental quality and pollution reduction [24].As such, the study implies that beyond gender inclusivity, the deliberate incorporation of diverse perspectives, including those informed by gender diversity, can serve as a strategic imperative for organizations aiming to navigate environmental challenges through effective and far-reaching management strategies.
Similarly, Model 3 reveals results concerning international directors (Int_D), demonstrating a significant and positive relationship.In line with our third hypothesis (H3), the coefficient for Int_D is positive (β = 4.919), and highly significant (p < .01),suggesting a favorable relationship between the presence of international directors and a company's investments in pollution reduction.The analytical findings put forth in our study robustly support the notion that the inclusion of foreign directors in a company's board not only serves as a symbol of its international image but also denotes a heightened commitment to societal stakeholders.This commitment is particularly noteworthy, as it is grounded in the perception that social standards in Western companies are commonly perceived to be comparatively higher [62].The presence of foreign nationals in directorial roles is posited to go beyond mere symbolism, as it is suggested to contribute to a greater emphasis on social responsibility.The reasoning behind this lies in the belief that individuals with international backgrounds bring diverse perspectives and a potentially broader understanding of societal expectations [63].Moreover, the infusion of foreign directors may foster a climate of diversified thinking, incorporating viewpoints from varied cultural contexts, which is argued to play a pivotal role in encouraging companies to adopt and adhere to environmentally responsible practices [88].Essentially, this study contends that a highly internationalized board, acts as a catalyst for instilling a corporate culture that places a premium on environmental responsibility, driven by a nuanced understanding of societal expectations and global social standards.
Finally, by employing proportion of politically linked directors as its proxy in Model 4, we obtain significantly positive evidence (β = 1.674, p < 0.05) for the influence of directors' political connection (Political_D) in relation to CPP as proposed in the last hypothesis (H4).Particularly, This result affirms that a boards with politically connected directors increases companies' investment in pollution reduction initiatives, because connected directors may readily confront the attitude of many other top managers for adopting social and environmental policies with political influence.Thus their political influence can drive the company's social conduct and ambitions.Political connections have the potential to bolster a company's performance, as demonstrated by previous research, as affiliated boards are subject to more rigorous oversight [26,89].Stringent oversight on connected directors, mandated by legislative bodies and political entities, establishes a compelling framework that shapes the behavior of senior leaders in affiliated enterprises.This heightened scrutiny not only compels strict adherence to regulatory frameworks but also influences strategic decision-making [66].Given the tight monitoring imposed on connected directors, senior leaders are prompted not just to comply with environmental regulations but to actively guide their companies toward pollution reduction initiatives.In a nutshell, the recognition of potential legal consequences and risks to reputation arising from non-compliance serves as a motivating factor, compelling senior leaders to advocate for sustainability initiatives.
The findings for the control variables are also summarized in Table 3.The relationship of board ownership (Board_Own) and corporate market value (TobinQ) to CPP is insignificant, while the rest of control variables have influential impact in improving pollution reduction investment of listed Chinese companies.Particularly, this study finds that board size (Board_S) have positive relationship with CPP, because larger boards are more likely to control managerial behavior on top level thus contribute towards corporate social agendas and improves green performance.Instead, this study finds that CEO duality (CEO_D) is significantly and negatively affect CPP, suggesting that dual status of CEOs become them more powerful and entrenched that may result in focusing on self-interested objectives that harms environmental pollution policies.Regarding the firms' economic characteristics, we find that the coefficient of return on assets (ROA) generates positive impact on firms' investment in pollution control projects.This generally implies that more profitable and firms with greater shareholders' value do more focus on social activities, maybe it's because stakeholders put pressure on profitable enterprises with significant market efficiency to participate in social activities.Along these variables, this study finds that firms' age (Age), firm's size (Size) and growth (Grow) also loads positive impact on environmental expenditure.The possible reason can be that larger and older companies are visible to face pressure from outsider stakeholders such as media, and public.

Analysis by GMM model
Our primary findings concerning the connection between internal monitoring and investments in pollution reduction may be susceptible to potential endogeneity concerns.To address various forms of endogeneity, including reverse causality, we opted for dynamic panel data analysis, specifically applying the Generalized Method of Moments (GMM).The central rationale for choosing GMM is to relax the stringent exogeneity assumption, which differs from the approach taken in ordinary least squares (OLS) and fixed-effect regression models.Recent research, as exemplified in studies [90,91], has underscored additional manifestations of endogeneity, such as dynamic endogeneity, which manifests when the current values of independent variables are influenced by their past performance.In our specific scenario, it's plausible that the firm's internal governance and monitoring framework may be influenced by its historical performance.According to Wintoki, Linck [92], the Generalized Method of Moments (GMM) addresses the challenge of dynamic endogeneity by allowing the current governance structure to be influenced by its prior performance.An inherent strength of GMM analysis is its robustness, achieved by incorporating internal instruments derived from the panel dataset itself, such as past values of the variables.Recent research has also employed GMM estimation and has consistently determined it to be the most appropriate and reliable approach for research related to governance [90,93].
Table 4 displays the regression outcomes obtained from the dynamic Generalized Method of Moments (GMM) model investigating the association between internal monitoring mechanisms and pollution prevention investment.In Model 1 of Table 4, the coefficient of independent directors is both positive and statistically significant (β = 5.700, p < 0.05), aligning with our initial findings.Furthermore, the significance of the AR(1) value is notable (p = 0.000), indicating the absence of autocorrelation in the first difference, while the AR(2) value is found to be insignificant (p = 0.359), affirming that the error terms in the level regressions were not correlated.Additionally, the Sargan test in Table 4 yields a statistically significant (p = 0.000), while the Hansen test's p-value is found to be insignificant (p = 0.286).
Model 2 unveils positive and statistically significant findings regarding the presence of female directors on the board and their impact on CPP (β = 1.981, p < 0.5).The results of the AR(1) test further strengthen the analysis, revealing a significant result (p = 0.000), which indicates the absence of autocorrelation in the first difference.Meanwhile, the AR(2) test yields an insignificant result (p = 0.450), signifying that the error terms were not correlated.Additionally, for Model 2, the Sargan test demonstrates a significant p-value (p = 0.000), while the Hansen test's p-value is not statistically significant (p = 0.428).Model 3 in Table 4 further reinforces our primary findings concerning international directors and their relationship with corporate pollution prevention, as it yields statistically significant results (β = 13.332,p < 0.01).The AR(1) results effectively address concerns of autocorrelation, showing favorable results (p = 0.016), while the AR(2) value indicates no issues with error terms (p = 0.132).Additionally, the Sargan test produces a significant p-value (p = 0.000), whereas the Hansen test's p-value is not statistically significant (p = 0.184).
Finally, Model 4 presents the GMM findings concerning the relationship between politically connected directors and CPP.The results of Model 4 are not only positive but also statistically significant (β = 6.381, p < 0.05), corroborating one of our primary findings.The AR (1) result is also significant (p = 0.000), confirming the absence of autocorrelation.Similarly, the AR(2) outcome reaffirms that there are no issues in the error term (p = 0.147).Furthermore, the p-value of Sargan test is significant (p = 0.000), while the Hansen test's p-value is not statistically significant (p = 0.526).
In summary, our baseline findings consistently demonstrated strength and robustness, suggesting that endogeneity is unlikely to be a concern.

Additional analysis
A characteristic that separates China from other transitional economies is prevailing presence of state ownership of many listed corporations.Though China is gradually moving toward a market-based economy from centrally planned structure, and dismantling the obstacles for non-state ownership to emerge.Secondary privatization reform have created a space and provided the requisite conditions for private companies and organizations with other ownership structures to emerge and thrive.So far, reforms have resulted in a new group with a diverse ownership structure and a high degree of internationalization. Prior research claims that private individuals are less beholden on other players (such as the government) for funding, and they are often more flexible in making company decisions [94,95].Because the primary goal of ownership reform was to shrink government involvement in business practices, give managers more autonomy.The independence of private shareholders enables them to utilize corporate assets for their personal gain rather than the betterment of society [96,97].Consequently, as the state reduces its ownership to facilitate the growth of private ownership, it can relinquish government control over critical decisions made by businesses.In such a case of government disengagement, firms may seek to justify spending in search for private needs, and therefore would be less active in social efforts.Thus the current study further improve the debate on internal monitors and corporate pollution control by considering how government withdrawal effects the intensity of internal governance in relation to pollution reduction.
Since economic reforms, the ownership structure of Chinese listed companies has been changed significantly, as government is decreasing its portion of ownership in companies as a result of secondary privatization.Thus this study considers government withdrawal by using a dummy approach that equal 1 if the government has reduced the state ownership in a particular year, and 0 otherwise.
By doing so, we report findings in Table 5 for the moderating effect of government withdrawal.Column A presents results for the sub-sample of firms with government withdrawal while Column B indicates sub-sample of firms without government withdrawal.By analyzing both groups in Table 5, our results suggest that internal monitors in firms with government withdrawal show less likelihood towards pollution reduction, since the results of models in Column A are negative except for politically connected directors.The underline reason for the negative outcomes in these firms may be that reduction in state ownership can become firms less responsive and sensitive to government.Due to less concern and less sensitivity stemming from powerful stakeholders (such as government), private owners are projected to face less pressure to focus on non-financial objectives, which may entail weak participation in environmental or communal interests, as well as reporting of these practices.Overall, when government reduces its ownership, then this may weaken their monitoring on firms that can in turn decreases firms' likelihood to invest in pollution reduction practices.
On the other hand, we find positive and significant results for all the models in Column B, suggesting that internal monitors in firms with government control are agents of the government thus hold positive attitude to participate in environmental initiatives and show more motivation to invest in environmentally-oriented projects.The explanation for this seems to be the internal governance and state owners' increased sensitivity to the government, as well as the government's coercive capacity as compared to non-state owners.The coercive pressure can be exerted by the strong rules and regulations that reflects the difference in pollution reduction sensitivity between state and non-state owners.However, the results for directors' political connection are statistically positive in both columns that imply that the director political links give the government an alternative way to influence company decisions, notably social ones.Earlier research suggests that political reliance reflect key decisions that are more common in private companies [98].Senior members (such as directors) of non-state-owned corporations are much reliant on governmental networks, and reflect these links to be very imperative than those of state companies counterparts [99].Generally, institutional links have an impact on the company's prospects via reducing risk, securing government subsidies, and easing regulatory constraints.These special privileges can come with a cost, like corporations' specific decisions (especially pollution reduction strategies) would be more susceptible to the advantages of political ties.In a nutshell, the mutual dependency between politically connected directors and government, and significant mode of governmental interference may the possible reasons for the positive relationship found in both type of groups.

Implications
Our study's findings have some important implications in perspective of theory and practice.

Theoretical implication
The foundation of our study aligns with agency theory.Consistent with agency theory, our study's findings support the notion that internal monitors, who act as agents, wield significant influence over corporate strategic decisions, including investments in pollution prevention.An important implication, particularly relevant for emerging economies like China, is that as these markets transition toward market-oriented economies, companies must grapple with heightened unpredictability concerning environmental investments [32].Therefore, from the viewpoint of agency theory, the presence of more influential monitors on corporate boards may assist organizations in effectively navigating the uncertainties associated with the environment and society [22,41].In such a case, boards with independent, female, international and politically connected director have the strong monitoring capability stopping the management unethical conduct, since our study found it efficient governance approach to control environmental pollution.Our findings recommend that the aforementioned internal monitors in boardroom advances internal governance and the board's independence which proves as the helping hand of the boards to monitor corporate management and then consequently, such boards are fundamentally believed to be more effective to reduce agency issues raised among companies' stakeholders form social policies [17,62].

Practical implication
From practical perspective, our study helps the practitioners to understand how internal monitoring mechanism direct firms' environmental behavior.In this vein, our findings suggest that board with higher independent, gender diverse, politically connected and with more foreigners are efficient internal governance mechanisms.This study underscores the importance of board independence, gender diversity, political affiliations, and international engagement, as these factors can effectively serve the purpose of monitoring and controlling, providing enhanced supervision and surveillance [18,27].This, in turn, helps in meeting stakeholders' interests by managing and reducing pollutants [44,56,85].However, it is strongly advisable to implement policies that establish a clear connection between a firm's environmental performance and the incentives and career prospects of its senior management, particularly the board of directors.This policy initiative aligns individual success with the overall environmental stewardship of the organization.By linking personal career prospects and financial incentives to pollution reduction initiatives, senior leaders are incentivized to prioritize and champion sustainable practices.This not only aligns the interests of key decision-makers with the company's environmental goals but also reinforces a corporate culture that places a premium on responsible and eco-friendly business practices.The tangible connection between personal success and environmental performance creates a powerful impetus for firms to actively participate in and drive initiatives aimed at reducing pollution, ultimately contributing to a more sustainable and responsible corporate landscape.
Instead, practitioners and policymakers should stress not just the implementation but also the enforcement of environmental policies.For this purpose, political and government involvement and pressure on enterprises may be considered, since our findings of the subsample guide legislators about the environmental consequences of governmental withdrawal by demonstrating that government withdrawal is not recommended from a larger social standpoint.

Conclusion
Prior research has primarily focused on investigating the influence of directors' characteristics on the broader spectrum of Corporate Social Responsibility (CSR) performance [9,19,23].However, a noteworthy gap in this body of literature is the lack of attention given to understanding how these directorial attributes specifically influence pollution control measures at the firm level.Despite pollution control initiatives falling within the purview of corporate social responsibility, there exists a distinct scarcity of scholarly work delving into the correlation between the characteristics of internal monitors and investments in pollution prevention.Recognizing this gap, our study seeks to address and contribute to this understudied area by examining how the diversity among internal monitors plays a pivotal role in shaping a company's endeavors to reduce pollution.By narrowing the focus to this critical aspect of CSR, we aim to enrich the existing literature and provide valuable insights into the complex dynamics between internal monitoring characteristics and a firm's commitment to pollution control.
Employing data from the world's largest emerging market (China) for the year 2012 to 2019, this study highlights the role of board attributes that represents the internal governance mechanisms.Considering the importance of these governance instruments, this study finds that independent, female, politically connected and foreigners directors on board positively affect companies' likelihood for investing in pollution control initiatives.The current study affirms that directors with aforementioned attributes play strong monitoring role regarding the behavior of firms' management.Taken together, our findings suggest that the higher representation of aforementioned directors boost their monitoring power that signals the fulfillment of stakeholders' demands.Highly independent boards with monitoring power effectively controls management decisions by exercising greater surveillance that may better facilitate the government to install better pollution prevention policies.
We further deeper into the examination of whether the positive attitude of internal monitors towards pollution reduction is influenced by government withdrawal.Further analysis indicates that when the government disengages from its involvement in enterprises, it exerts a significant adverse effect on the relationship between internal monitors and companies' initiatives in pollution control.The reduction of government influence leads to a shift in priority towards private interests within these corporations, potentially undermining their commitment to social and environmental objectives.Consequently, this study extends the existing body of research on government disengagement and ownership by demonstrating that companies experiencing a decrease in government ownership are less inclined to make environmentally beneficial investments.

Limitations and future directions
This research have also some limitations that may be considered in planning future investigation.For instance, this research study has used model to investigate only the presence of internal governance instruments (like board of directors structure) but future studies may also use more holistic approach using other board features such their social ties, and external stakeholders such as media, regional level institutions etc., any of these factors may provide mechanism for the main evidence.In addition, this study exclusively utilizes data from an emerging economy, China.It is worth noting that the findings of our research may not be universally applicable to other institutional settings, where it would be advantageous to subject the study's hypotheses to further examination.The rationale behind this is rooted in the distinctive characteristics of Chinese companies, such as their ownership structure, which differs significantly in terms of concentration, as well as variations in governance structures and legal enforcement when compared to their Western counterparts.As a result, the empirical conclusions drawn from this study cannot be generalized to companies operating within developed markets, where the proposed hypotheses should be tested further.

Table 5 . Additional analysis.
This table compares findings between two groups of firms with government withdrawal and without government withdrawal.Government withdrawal refers all those firms in which government have reduced state ownership.T-statistics are highlighted in parentheses.***, **, * denotes significance level at 1, 5 and 10%, respectively.https://doi.org/10.1371/journal.pone.0297926.t005